Beyond Efficiency – How GBS is Becoming an Engine of Enterprise Value
“The Quest for Value is a Crowded Street”.
A great thought-provoking comment made to me in a TEAMS call yesterday with a friend and colleague.
Whilst this may be true, genuine enterprise value remains an uncrowded destination . . . 😉
These thoughts coalesced as a report hit my inbox.
“Beyond Efficiency: How GBS is Becoming an Engine of Enterprise Value”.
We know this headline, but there are genuine challenges in pursuit of the only objective that will mitigate the existential threat of GBS irrelevance.
There are real contradictions in what GBS leaders are reporting. They do not go unnoticed by our coalition of stakeholders and customers.
The report written by Barbara Hodge, Maria Saggese, Syazana Lim and Dorian Redding comments in some detail on the findings of the annual SSON Research & Analytics GBS State of the Industry survey.
Traditionally, GBS “value” has been relatively easy to define: lower operating costs, standardized processes, higher productivity and improved service levels formed the cornerstone of every business case. These metrics were tangible, measurable and aligned with the expectations of finance leaders who typically sponsored GBS transformation
- Most GBS leaders say they want to create enterprise value.
- But the same organizations still measure success through cost, SLAs and transactional efficiency.
Just 6% of GBS organizations are recognized as an enterprise value enabler, and a further 5% are recognized as strategic value engine with a measurable revenue impact.
Primary stakeholders (CEO, CFO, Business Unit leaders) in the main, outwardly measure GBS success in terms of SLA/KPI adherence, cost per transaction, customer satisfaction and so on.
It might seem reasonable to assume that, if our primary stakeholders measure us in this way, then that’s the way we should measure ourselves. But GBS represents a big cost base, and you can view that through differnet lenses!
The Kano model is a helpful framework to help us understand the contrast between customer satisfaction (achieving expectations) and customer delight (the “wow” factor of going above and beyond).
From a primary stakeholder perspective, it is understandable why the “old school” measures are easiest to work with. They don’t create any friction or tensions with other units and in “calm seas” can work out OK.
But we are in anything BUT “calm seas” and when the drive for increased revenue in challenging markets comes to the business units, there is often some back room “horse trading”, which you can see the results of, sometimes too late.
If GBS is NOT delivering enterprise value beyond “table stakes” expectations, it is surprisingly easy to suddenly realize that a decision has been made to repatriate GBS activities to the markets, in return for commitment to greater growth and justified for reasons of “increased accountability”.
It has happened in the past couple of years and continues to happen.
It happens without fanfare and big announcements, but if you look you can see the changes and hear the silence from the former leaders.
We need to find ways to engage in and impact product cycle time, revenue growth, reduction in COGS and SG&A, and improvements in overall P&L and Working Capital. This requires us to build stronger stakeholder coalitions, where the markets and business units do not feel threatened by any perception of GBS attempting to “usurp” the “P&L crown”.
As the report authors comment “We must reposition GBS around outcomes rather than activities. To ask, “How are we improving working capital? How are we accelerating revenue? How are we enabling better decisions?” That is a very different conversation from “How many transactions did we process per FTE and at what cost?”
We need a Value Scorecard that can be co-owned with business units, but that captures the confirmed value delivered in terms of cash and P&L impact.
Key GBS principles need a refresh;
- Start with enterprise value outcomes (not GBS scope)
- Build an end-to-end process capability (but controversially, don’t worry about “ownership” – it’s a myth and a diversion!)
- Work hard to build ever stronger executive stakeholder coalitions based on earned trust – in an “end-to-end” world, you need them more than ever
- Align metrics to enterprise value creation
Critically, don’t allow the apparent acceptance and “satisfaction” with conventional GBS measures to create any complacency, anywhere in the organization.
Enterprise Value Creation may be a challenging goal, but visible execution towards it will be the saviour of Global Business Services.
No better time to start the journey . . .
Thanks for reading . . .
Beyond Efficiency – How GBS is Becoming an Engine of Enterprise Value